Despite OPEC Cuts, Iraq To Boost February Oil Exports To Record High

One month ago, we were surprised to report that while oil traders and analysts were expecting OPEC member nations to, at least initially, pretend to comply and affirm their adherence to the production cuts as per the Vienna meeting (before eventually cheating on their quotas), a very aggressive Iraq was not only not cutting output, but according to Iraq’s national oil company, the State Organization for Marketing of Oil (SOMO), had disclosed plans as of December 8, nine days after agreeing to cut production, to increase deliveries of its Basra oil grades by about 7 percent to 3.53 million barrels a day compared with October levels. The unexpected news was first reported by the WSJ which obtained a detailed oil-shipment program: such oil shipments represent about 85 percent of Iraq’s exports.

To be sure, Iraq did come up with a convenient scapegoat when just days later it blamed the autonomous Kurdish region of exporting more than its allocated share of oil. As a reminder, as part of the deal, Iraq, OPEC's second largest producer, agreed to reduce output by 210,000 bpd to 4.351 million bpd. However, it immediately accused Kurdistan, over whose oil production Iraq's level of control is limited at best, of producing well more than its quota.

"The region is exporting more than its share, more than the 17 percent stated in the budget,” Iraq oil minister Haider al-Abadi said at the time.

Fast forward to this morning, when Reuters, looking at the same loading schedules, reported that Iraq plans to raise crude exports from its southern port of Basra to an all-time high in February, keeping exports high even as OPEC production cuts take effect this month.

Just like last month, the country's State Oil Marketing Company (SOMO) announced plans to export 3.641 million barrels per day (bpd) of crude in February, according to trade sources and preliminary loading schedules obtained by Thomson Reuters on Tuesday, beating a record of 3.51 million bpd set in December. The February volume includes 2.748 million bpd of Basra Light and 893,000 bpd of Basra Heavy, the documents showed. Related: The Secrets Behind Russia’s 2016 Oil Success

Reuters adds that for January, SOMO had planned to export 2.627 million bpd of Basra Light and 903,000 bpd of Basra Heavy. Basra crude accounts for the bulk of oil exports from Iraq.

Surprisingly, despite the jump in exports, Iraq's oil ministry said on Tuesday it has cut oil production by 160,000 bpd since the beginning of January in line with the OPEC decision.

While it is unknown if Iraq will again blame the Kurds on its seeming non-compliance, when despite allegedly cutting production it continues to capture market share by exporting more, oil has slid and at least in early trading was down to session lows, and was approaching a critical support level.